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In a new draft advisory, the New York State Liquor Authority (“NYSLA”) has proposed a narrow definition of “private collection” that would reduce the amount of wine that can be sold in New York by non-licensed sellers. The purpose of the advisory is to provide guidance on the “proper purchase and sale of private collection wines and liquors,” but the advisory would have the practical effect of reducing the amount of private collection wine available to consumers. Some fine dining establishments with coveted wine lists rely on private collection sales to obtain hard-to-find wines. For this reason, some in the hospitality industry are predicting Doomsday for the wine lists of New York City’s high-end restaurants.

Context: The “What” and the “Why” of Private Collection Sales

In New York, “private collection” wines are bottled wines that are sold by a private owner to a licensed wholesaler or retailer. Whereas most wines are sold by licensed businesses to consumers or to other businesses through the state’s “three-tier system,”[1] private collection wines are sold by non-licensees (usually individuals) to licensed businesses. A private collection sale could involve, for example, an investment banker who collects wine selling a few of her bottles to a wholesaler or to a restaurant that is licensed to sell them. State law expressly authorizes this type of sale:

Any nonlicensed person legally owning wine and/or liquor is authorized to sell that wine and/or liquor to a licensed person or through a licensed person to an individual or group of individuals by any lawful method of sale or by means of an auction by a licensed person conducted pursuant to this section. The licensee involved in such sale shall ensure that each bottle of wine and/or liquor sold from a private collection has a permanently affixed label stating that the wine and/or liquor were acquired from a private collection.

[N.Y. A.B.C. Law § 99-g(1)(a). See also Id. at § 85.]

Buying wine from a private collection is a good way to obtain treasured bottles that are hard to come by in the three-tier system. It enables restaurants, auction houses, and wholesalers to build their inventories with wines from prized estates and vintages, and if foreign wines are involved, it can spare wholesalers the headache of import compliance.

The Draft Advisory

As NYSLA points out, the Alcoholic Beverage Control Law (“ABC Law”) does not define “private collection.” It merely authorizes the sale of private collection wines. According to NYSLA, this has led to “confusion as to what constitutes a private collection for purposes of compliance with [ABC Law] Sections 85 and 99-g.” NYSLA also claims that “many of the wines and liquors purchased in this manner are currently price posted in this state and available for purchase via the three-tier system,” meaning that private collection sales are not necessary for these wines. Unfortunately, there are no reliable data on private wine collection sales throughout New York City, let alone throughout the state. NYSLA states, however, that many retailers purchase “large quantities of wine and liquor” that they claim are from private collections.

In its draft advisory NYSLA proposes the following definition for “private collection” wines:

Bottled white or[] rose wine which is more than five years old and that was purchased either at retail or auction and owned by the non-licensed person for a minimum of two years with proof of purchase, or;

Bottled red wine, port, or sparkling wine, which is not less than 10 years old and that was purchased either at retail or auction and owned by the non-licensed person for a minimum of two years with proof of purchase.

There is no explanation of the rationale for the five-year and ten-year requirements, and while it makes sense to define “private collection,” the proposed definitions leave one wondering how these definitions were reached. NYSLA’s observation regarding the purchase of wines that are available in the three-tier system, however, shows its preference for the traditional framework.

Implications

As alluded to above, many of New York City’s high-end restaurants and auction houses source a portion of their wines from private collections. Compared to other kinds of alcohol sales, private collection sales are minimally regulated, so an overnight[2] change like the one proposed could cause a shock to auction houses and upscale restaurants. It would lead to an immediate shortage of rare wines for these buyers. It is unclear just how many restaurants purchase wines from private collections, but the percentage is probably small.

If the proposed advisory is adopted, non-licensed collectors whose wines don’t meet the age criteria would have to obtain licenses in order to sell their wines to businesses, making investing less attractive. Furthermore, the age requirements are rigid and will, in some cases, be at odds with optimal aging and prime drinkability. Not all wines are created equal, so the five- and ten-year aging requirements aren’t particularly helpful to buyers or consumers.

If NYSLA insists on reining in private collection sales, perhaps a better approach would be to focus on provenance, reporting, or tax compliance. Certainly, any change to private collection policies should be phased in rather than implemented overnight. Furthermore, if NYSLA does ultimately curb private collection sales, it should also adopt policies that will enable licensees to obtain sought-after wines more easily through other avenues. In any event, it would be helpful to the public discourse to see the reasoning process behind the proposed definitions, along with some data on private collection sales (amount of private collection wine sold, origin, dollar value, and number and type of buyers, for example), to the extent that they are available. Then again, such data might not be available precisely because of the current lack of regulation.

NYSLA will consider the draft advisory at its full board meeting on Tuesday, January 19th. The Authority is accepting comments from the public through January 14, 2016. Comments can be sent to: Secretary’s Office, State Liquor Authority, 80 South Swan Street, Suite 900, Albany, NY 12210, or to Secretarys.Office @ sla.ny.gov.

***UPDATE*** Full NYSLA Board consideration of the proposed advisory on private collection sales has been postponed until April 26. Accordingly, NYSLA has extended the deadline for comments on the proposed advisory. Comments will now be accepted through April 21 and can be sent to: Secretary’s Office, State Liquor Authority, 80 South Swan Street, Suite 900, Albany, NY 12210, or to Secretarys.Office @ sla.ny.gov. Follow me on Twitter for these kinds of updates and more.

***UPDATE*** Full NYSLA Board consideration of the proposed advisory on private collection sales has been postponed until June 21. Accordingly, NYSLA has extended the deadline for comments on the proposed advisory. Comments will now be accepted through June 10 and can be sent to: Secretary’s Office, State Liquor Authority, 80 South Swan Street, Suite 900, Albany, NY 12210, or to Secretarys.Office @ sla.ny.gov. Follow me on Twitter for these kinds of updates and more.

***UPDATE*** NYSLA has announced that it "is no longer considering this proposed Advisory, therefore, it will not be calendared at the June 21st meeting as previously announced."

[1] The three-tier system is New York's alcohol distribution framework, wherein producers sell to distributors (or "wholesalers"), and distributors sell to retailers. In most circumstances, only a retailer can sell directly to consumers in this system.

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